Don't let State Farm gouge policyholders

So much for the good neighbor. It's not enough, apparently, that State Farm Florida will cancel its remaining 700,000 homeowners policies over the next two years. Now the state's largest private property insurer wants to pick the pockets of its customers one last time as it flees the state. Florida Insurance Commissioner Kevin McCarty should not allow that to happen.

The Florida subsidiary of Illinois-based State Farm informed regulators Friday that it wants to trim nearly all of its discounts for homeowners insurance. The changes would eliminate discounts for customers with multiple policies, for those who have hardened homes against hurricanes and even for customers who have been claim-free for years. State Farm's message: We don't care if you have been loyal or invested thousands of dollars to mitigate hurricane losses after the state required premium discounts in return. Just give us more money before we drop you.

The company says it needs the additional cash to remain solvent as it withdraws from the market. It claims it is paying $2 in claims for every $1 in premiums it collects. But it's not nearly that simple. State Farm's request is just the latest salvo in a decade-old strategy to extract what it can from Florida without putting the parent company at risk. Now that the strategy has finally run its course. In part because regulators rejected last year's unjustified request for an average 47 percent rate increase in property insurance rates, the company is cutting and running.

Of course, Florida helped create this mess. More than a decade ago, after Hurricane Andrew sent shock waves through the nation's property insurance market, Florida allowed State Farm and other insurers to create state subsidiaries to protect their parent companies from potential Florida losses. But the parent company still collects money from Florida, including selling the Florida operation reinsurance every year. After the 2004 and 2005 hurricanes, the company loaned the Florida subsidiary $750 million to pay claims — which the subsidiary has not repaid.

But that doesn't overshadow one other fact: State Farm's national operation reported $5.5 billion in profits last year. And Florida was not one of the top five states for claims payments. A leading insurance industry information provider called ISO Property Claim Services in January ranked 2008's top five states according to insured property losses: Texas ($10.2 billion), Louisiana ($2.2 billion), Minnesota ($1.6 billion), Ohio ($1.3 billion) and Georgia ($1 billion).

State Farm could be justified in seeking higher premiums here. But the company's tactics since McCarty rejected last year's rate increase request have been overtly political. First it persuaded legislators to let it charge whatever premiums it wanted, but Gov. Charlie Crist appropriately vetoed the bill. Now it's attacking the very mitigation discounts it once trumpeted.

The company said it has not determined what the elimination of discounts would mean for individual policyholders. But state Sen. Mike Fasano, R-New Port Richey, told the Times that he was told in a briefing with regulators that the increase would amount to as much as 44 percent for the average customer. That sounds awfully similar to the 47 percent base rate increase McCarty rejected last year. His answer should be the same this time around. If State Farm Florida needs more cash before it flees the state, it should get it from its parent company rather than gouge its remaining policyholders here.